Save Our Homes property-tax break loses luster

Sarah Ward of Winter Park is among residents who have saved little… (JOE BURBANK/ORLANDO SENTINEL )

April 27, 2011|By Mary Shanklin, Orlando Sentinel

Central Florida's housing slump has wiped out longtime homeowners' favorite tax break — Save Our Homes — as the once-fast-rising home prices that had long penalized newcomers, landlords and snowbirds have come back down to earth.

The Save Our Homes tax break, approved by Florida voters about 20 years ago, stemmed the rising tide of property taxes for house owners with a homestead exemption back when the housing market was hot because it limits increases in those homes' assessed values to 3 percent a year. As a result, the tax bills of homeowners whose houses are their permanent residence grew little even during the boom, when property values grew by as much as a third annually.

The gap between the market value and the assessed value of those homes became so great that, in 2008, almost two-thirds of Florida voters supported "portability" so Save Our Homes homeowners could take their break with them to a new house. But because home values had already started to collapse by then, there is little left to port.

Further minimizing the effects of Save Our Homes, economic forecasts from CoreLogic and others suggest that property values will increase less than 3 percent annually for the next few years as the state emerges from the worst recession since the 1930s.

Meanwhile, the property owners who never qualified for the Save Our Homes exemption no longer bear a disproportional share of Florida's tax burden. Because their property taxes are tied directly to market values, they paid dearly as values boomed, but in recent years their tax bills have dropped dramatically with the slumping market.

Seem complicated? Florida's property-tax situation could become even more complex with new tax-break proposals working their way through the Legislature. Various proposals would extend help to first-time homebuyers, owners of property other than homes, and homeowners during times when values drop, though all of these initiatives would require 60 percent voter support at the polls to become constitutional amendments.

Save Our Homes break diminishes

On Winter Park's Grover Avenue, a shaded block of 1950s homes, longtime homeowner Sarah Ward has seen her tax bill drop about 3 percent, to $2,083, from five years ago. Meanwhile, landlords and winter residents with houses on Grover have seen their property taxes drop more than 60 percent during that same time — to $2,866 for a house about Ward's size and age — keeping pace with the plummeting house prices in the Orlando area during that time.

Like most homeowners, Ward was unaware of her neighbors' drastically reduced tax bills but happy for a nearby snowbird whose taxes have dropped more than $1,800 while Ward's have fallen only $64.

"I'm amazed," Ward said. "Well, I'm glad for her."

Now that the real-estate market has crashed, many longtime homeowners with large Save Our Homes tax shelters have actually seen their tax bills increase in recent years. That's because most longtime homeowners had a huge cushion built up, and the market values of their homes climbed far above the amounts actually taxed before heading back down. Their tax bills will continue to climb as long as their market value exceeds the value of the property that gets taxed.

Four years ago, as the region's homebuying frenzy peaked, 177,653 Orange County homeowners were sheltering an average $103,159 of their properties' value from taxes. By last year, after plummeting home values had eroded much of the tax cushion, more than 65,000 of those Orange County homeowners had lost their Save Our Homes advantage completely. And for those who still got the break last year, their average exemption had shrunk to $34,816, according to a recent report by the Orange County Property Appraiser's Office.

Bottom line: Orange County tax bills that used to show Save Our Home taxpayers they were saving more than $2,000 on average now show their tax break is $680 on average.

To be clear, longtime homeowners still have a tax advantage over property owners with no homestead exemption, which is the trigger to qualify for Save Our Homes. But so much of the SOH homeowners' tax buffer has eroded in recent years that owners of high-end homes are more likely to still have an exemption than homeowners along a street such as Grover Avenue.

Though the intent of Save Our Homes was to keep fixed-income residents from being taxed out of their primary residence, an unintended consequence has been that wealthy homeowners with houses on lakes and in other fast-appreciating locations ended up sheltering a large chunk of their home from taxes.

Consider that, in Orange County, only a quarter of the homestead-exemption owners with houses worth less than $300,000 still have a Save Our Homes tax cushion, while almost half of the owners of million-dollar-plus homes still have one.